Danubia Global Refutes Wall Street Journal Article.

BUCHAREST, Romania -- An article was published on June 20, 2006, by The Wall Street Journal in regards to Danubia Global Inc. According to Mr. Bogdan-Valentin Bichir, Director of Operations of the Bucharest office of Danubia Global Inc., "While the company voluntarily took the opportunity to provide full background and information for the preparation of the article - including more than five hours of personal interviews with company personnel - a number of key factual errors and inaccuracies were subsequently published in the article. Simply put, the record in this matter must be corrected."

"We understand and appreciate concerns about corruption in Iraq," explained Mr Bichir, "as rumors about it continue." That said, he noted, "there are many companies trying to do honest work at a fair price but find it hard to succeed in this terror-filled environment. Our company fully supports the effort to reconstruct the civil infrastructure of Iraq. We are proud of the role we have played in this endeavour. We have shared the pain and tragedy of colleagues killed or injured while carrying out this important and dangerous work; and we feel the same sense of loss for our Iraqi colleagues who brave extremely grave dangers daily to rebuild their country. For them, showing up for work is an act of great faith and commitment. At the same time, it is gratifying to see the overall progress in restoring normal life for the Iraqi people."

Mr Bichir stated that the company had already replied by letter on May 26, 2006, to questions emailed to the company by The Wall Street Journal in late May regarding the bona fides of the company:

------

26th of May, 2006

The Wall Street Journal

New York, NY (USA)

To fax no. [phone]

Dear *** ,

As stated the recent press release issued by the company, "Danubia Global is an independent operating company with no ties to Custer Battles LLC. Any assertion otherwise is wholly inaccurate."

Despite suspicions of others, any assertion to the contrary is simply incorrect. There is no financial or business relationship either between Danubia Global Inc. and Custer Battles LLC, or between Danubia Global Inc. and/or Scott Custer or Michael Battles. Neither Custer Battles LLC, Scott Custer or Michael Battles have any ownership interest, participation or other right to/in Danubia Global Inc. - directly or indirectly - nor do they have any "quiet equity stake" in the company, as stated in your email. And they never have. There are no "on-going ties" as suggested. As previously stated, Danubia is a free-standing and independent company in which Custer Battles LLC, Scott Custer and Michael Battles have absolutely no interest or right whatsoever.

Danubia Global Inc. was not created to avoid a US government ban on Custer Battles LLC and its principals. Any assertion to the contrary is incorrect. Danubia is not a shell company. It is a small, though fully operational company that has been managed by a General Manager in Iraq and assisted by a staff of administrative personnel on site.

The company purchased some equipment from Custer Battles LLC. These items included beat-up and, in some cases, damaged vehicles and trailers that it hoped to repair back to working order; they were not "valuable." Custer Battles LLC tried to sell these items for several months in Iraq with no success (they were unmarketable anywhere else because of their condition); in part also, we understand, because no one wanted to buy anything from a company that had been suspended and still under investigation by the US government.

Danubia understands that Custer Battles LLC was on the verge of collapse and closure during the winter of 2004/05, as a result of the US government suspension that prohibited Custer Battles LLC from bidding on or renewing any of their then-current contracts. The business that was Custer Battles LLC, it seemed, was at an end. It was at this point that Mr. Levinson made a pitch to Scott Custer and Michael Battles that he would like the opportunity of purchasing enough assets to try a make a go of it on his own. With no chance of continuing in business, Custer Battles LLC agreed.

With the agreement fully disclosed, Danubia succeeded by legal novation to one of Custer Battles' contracts that was then up for renewal. This transition was accomplished in full compliance with applicable Federal Acquisition Regulations, after review by legal counsel of all parties.

Neither Emergent Business Services nor its owner, Rob Roy Trumble, were affected by the suspension of Custer Battles LLC. Danubia contracted at arm's length with Emergent to provide back-office administrative support while Danubia built up its own in-country staff and replaced departing employees of Custer Battles LLC. This is not an abnormal business practice, and was intended to last only a few months. Such back-office work included, for a short time, payroll support for which Danubia paid in full, including all of the salaries and wages due the employees and staff of Danubia. As soon as Danubia was able to arrange its own automated payroll facilities, this short-term solution was terminated. At all times, Danubia paid Emergent for its services. Emergent was, at the same time, doing business with other clients, trying to build a business.

Concerning the "incident at Fallujah," Danubia will make no comment as we have been informed that a confidential US military investigation continues into several apparently separate incidents in the theater of operations on the date in question, and we have been cautioned against any disclosure - except to state that the temporary suspension of Danubia stemming from the company's role in the matter has been lifted.

Please let me know if I can be of any further assistance to you on this matter.

Kind regards,

Bogdan-Valentin Bichir

Director/Bucharest Office

------

Mr Bichir noted furthermore, "After a preliminary investigation was conducted by US military authorities, the temporary suspension was lifted. At all times Danubia personnel, including General Manager Amy Clark, provided full disclosure and complete documentary and technical evidence to the US military authorities who, after review of this proof, lifted the temporary suspension against the company. The company has offered on several occasions - and continues to offer - to provide the US military authorities with any further information desired and/or arrange personal interviews with the security guards who were present during the events in question. No US military or civil authority in Iraq or elsewhere has ever once responded to or accepted numerous company offers to help or our repeated formal requests for clarification. The June 20 newspaper report should have stated these facts more clearly and emphatically. We find it disturbing that The Wall Street Journal can get copies of confidential documents of an ongoing confidential US military investigation while the repeated requests of our company, alleged to have been a participant in the events in question, are entirely ignored."

Mr Bichir explained further, "With daily reports of insurgents masquerading as Iraqi Police or Iraqi National Guard personnel while committing brutal and violent atrocities throughout Iraq, it is hardly remarkable that the units that attacked our convoys wore Iraqi Police or Iraqi National Guard uniforms. Our convoy leaders and guards acted appropriately in self-defense and in defense of the civilian drivers and trucks under our care. It should be remembered that our convoy work took us through the most dangerous war-zone in Iraq, Al Anbar Province, where it is routine for insurgents to masquerade as official Iraqi personnel."

The Wall Street Journal article that appeared on June 20, 2006, contained numerous factual errors and omissions. All of these topics were voluntarily discussed in detail by Mr Richard Levinson and Ms Amy Clark, General Manager Iraq, during personal interviews with The Wall Street Journal reporter prior to publication of the June 20 article. As published, however, the story left out key information, and instead left an incomplete picture rife with inaccuracy, innuendo, and misinterpretation.

--Mr Levinson explained at great length to The Wall Street Journal that the reason he made a pitch to be able to accede to Custer Battles contracts was that Custer Battles, itself, was on the verge of collapse. It had not been successful in otherwise trying to sell off any of its assets or contracts, despite months of intense effort. He wanted to safeguard and maintain his own employment as well as employment for colleagues who otherwise would be out of work. Although he had no experience or background in military or security work, Mr Levinson believed that Danubia Global, with a core group of managers, might be able to develop business relationships and compete competitively for work under various UN and non-governmental (NGO) agencies with which he was familiar from his prior employment in the Department of Democracy and Human Rights in the US State Department, where he served eight years and was the recipient of two Superior Honor Awards. As described to The Wall Street Journal, Mr Levinson had a strategy of turning slowly away from an Iraq-focused, security business (such as that operated by Custer Battles) to a more diverse logistics, transportation, and administrative service provider for UN and NGO agencies in Central Asia, Africa and post-conflict regions. This was a completely different strategy than that of Custer Battles, and one that more appropriately fit the professional background and experience of Mr Levinson. To this end, the company has continued its effort to register with the panoply of UN and NGO agencies working in hardship areas, and to devise relevant offerings for humanitarian aid, disaster relief, and emergency services.

--The company and Mr Levinson deny emphatically, as stated in the June 20 article, that he said "that he created the companies to avoid paying US taxes in the event the firms were later sold and to minimize his liability in American courts if employees were killed or wounded in Iraq." This purported 'statement' was entirely misquoted and is thus, unfortunately, extremely misleading. When asked by the reporter "Why were the companies set up in Romania and BVI?" Mr Levinson explained that in the fall of 2004, a potential institutional investor in Romania (unrelated to Custer Battles, Windmill International, or any other person previously associated with Custer Battles including Mr Levinson) had reached a preliminary agreement to acquire Custer Battles and demanded, for his own internal Romanian legal and tax purposes, that the transaction be structured and situated in a tax-neutral jurisdiction.

--Mr Bichir continued, "Initial legal steps of the acquisition were agreed amongst the principals and undertaken by the parties including the establishment of Danubia Global Inc. SRL (Romania), and Danubia Global Inc. and Security Ventures International Ltd in the BVI - all for the purpose of satisfying the demand of this unrelated institutional Romanian investor who had agreed in principal to acquire Custer Battles." (From other sources, The Wall Street Journal was already aware that these negotiations had, in fact, taken place in the fall of 2004.) Because some transactional steps of the deal were not carried out in the following weeks, the parties ultimately called off the transaction and the deal failed. According to Mr Bichir, Mr Levinson told The Wall Street Journal that it was the potential Romanian investor himself - and not Mr Levinson who at the time was a mere salaried employee of Custer Battles with no authority or say whatsoever in the matter - who wanted to avoid (a) US tax implications in the event that he later sold his interest in Custer Battles, and (b) liability in US courts for any American casualty in Iraq because of the vast difference in legal procedures and laws between Romania and United States on such matters. The potential Romanian investor was the party wishing to avoid contact with the US legal system and foreign laws.

--According to Mr Bichir, "All of these events preceded Mr Levinson's pitch (described in the May 26 letter, above) to Custer Battles. Thus, the corporate structure of Romanian and BVI companies was already in place - and Mr Levinson just made do with the structure that existed at the time; that it was not "his" corporate structure; rather, he merely succeeded to a Romanian-BVI company structure already in place. The name of the company itself, "Danubia Global," was chosen by the potential Romanian investor."

--Mr Bichir further pointed out that all of the Americans (as well as other Western ex-pats, third country nationals, and Iraqis who worked for the company) were at all times fully covered by Defense Base Act insurance (DBA) as required by US contract law. As such, there was no US liability issue to consider in any case.

--Mr Bichir also emphatically stated, "Neither were the companies in Romania and/or BVI created to avoid a US government ban on Custer Battles." Mr Levinson, who attended meetings in Bucharest with Romanian lawyers representing the potential Romanian institutional investor described above, told The Wall Street Journal that these companies were set up at the instance and demand of the Romanian investor in order to minimize the investor's exposure to US law and regulation. Mr Bichir noted, "The investor's idea was to create a fully Romanian-based company with no formal legal nexus with the United States; after all, Mr Levinson explained, the investor was Romanian and wanted to set up the company headquarters in Romania - this should not cause undue concern; it is normal business practice everywhere."

--The June 20 article further states that Danubia Global General Manager Amy Clark "held a similar position with Custer Battles." According to Ms Clark, she never held the position of General Manager with Custer Battles. Ms Clark was hired by Custer Battles as a contracts manager and later served as financial manager of its logistics operations. At no time did she serve as general manager or hold "a similar position" at Custer Battles. "To suggest otherwise," Mr Bichir said, "is a transparent, artificial and inaccurate attempt to inflate Ms Clark's earlier role at Custer Battles. Again, we were surprised that a newspaper like The Wall Street Journal would do something like this. The newspaper seems to be 'creating' facts instead of reporting them."

--The June 20 article also states that Danubia employees were "for a time" paid out of a Custer Battles account and implies that this indicates a continuing "shell" relationship with Custer Battles. As Mr Levinson explained to The Wall Street Journal, noted Mr Bichir, the company had from its earliest days tried to locate an automatic payroll provider in Romania but, despite all efforts, found that there was no firm in Romania which could provide the required services. The company then looked elsewhere in Europe but, again, found no firm providing the required services. Anxious to pay its personnel on time, and concerned that any delay in payment would result in the immediate mass resignation of personnel, and thus the end of the company, Danubia requested the American company Automated Data Processing (ADP), which had provided similar payroll services for Custer Battles and Emergent Business Services, to handle its payroll on a short-term basis. Because Danubia is a Romanian company, ADP required documentation and other due diligence normally not required of US-based companies. The delay in completing the same caused further delay and as soon as Danubia found another automated payroll solution, all contact with Custer Battles, Emergent Business Services, and ADP were terminated. At all times, the salaries and benefits of Danubia personnel were paid in full by Danubia, as reported accurately by The Wall Street Journal.

--The June 20 articles states, "While the US sanctions technically put Custer Battles out of business, it never actually shut down." To his knowledge, Mr Bichir said that there has been no Custer Battles activity in Iraq since March 2005. Custer Battles was out of business. The article mentions, furthermore, that Danubia employees "continued to work out of Custer Battles trailers." This is incorrect and misleading, Mr Bichir noted, as those trailers had been purchased by Danubia Global and were being used to house its own personnel.

--The June 20 article states that Mr Levinson "was a former Custer Battles senior executive." As Mr Levinson explained repeatedly to The Wall Street Journal, he was originally hired as a contracts manager but within months was working exclusively on possible private equity transactions for the company, completely unrelated to the security side of Custer Battles. At no time was he considered a "senior executive" - his pay level was far below senior-level and he was never included in the group listed as directors or senior managers on the Custer Battles website, nor did he ever share in the pool of quarterly profit sharing that Custer Battles distributed to senior executives and/or managers. In essence, Mr Levinson was a mid-level employee. This was all explained to The Wall Street Journal which, instead, inaccurately inflated Mr Levinson's role in Custer Battles to "senior executive."

--The June 20 article states that Danubia Global "won a series of government-related contracts worth $1.28 million per month" - implying that the company was making lots of money from contracts in Iraq - but failed to explain that none of these convoy security contracts were performed as expected, nor was this sum ever earned or realized by the company. Convoy deliveries anticipated under these contracts were made only sporadically. Mr Bichir explained, "We told The Wall Street Journal that these contracts were never fulfilled as contracted. Why such a reputable newspaper would fail to publish this important fact surprised us. The newspaper knew that these contracts were never completed as expected yet it chose to give the impression that Danubia was making millions every month. As was fully explained to The Wall Street Journal, these contracts called for 6-months of security work comprising 5-8 secured convoys per day; but they were all cancelled after a few deliveries. The counter-parties did not pay, and Danubia was stuck with over $250,000 of uncollected receivables and paid-out salary costs. We had to stop our convoy security business and lay off dozens of personnel as a result of these non-payments. Why were these facts ignored? By placing this statement where it appeared in the article," noted Mr Bichir, "it looks like we are a huge company making millions - this is simply not the fact."

--The June 20 article includes gratuitous and inaccurate remarks about the background and life of Mr Levinson, the company's owner. The article inaccurately reports that his divorce "took more than 12 years and $1 million in legal fees to resolve." As explained by Mr Levinson in detail to The Wall Street Journal prior to publication on June 20, the matter of his divorce was settled very rapidly in October 1992. It was the ensuing child custody litigation brought by his former wife - not the divorce - that took 12 years and $1 million in legal fees to resolve. Mr Levinson was the original residential parent and while his former wife complained about various matters, in essence Mr Levinson prevailed as there was no change or adjustment in his custody and care of the children during their minority. The subsequent bankruptcy was unrelated to any business venture or participation, but directly a result of the legal and related fees incurred in the proceedings which, as stated above, were resolved in favor of Mr Levinson. As Mr Levinson explained to The Wall Street Journal, the legal liabilities were far less than the $400,000 listed in the bankruptcy papers. Many debts were listed two or three times as it was unclear if creditors or their legal representatives held title to the debts. Mr Levinson explained that under US bankruptcy law it is required to list each such potential creditor separately and equally, and this fact accounts for the apparently large sum listed in the bankruptcy papers. This duplication of listings was acknowledged by The Wall Street Journal, which admitted having copies of the bankruptcy papers, yet they were ignored when publishing the June 20 article. "One can only surmise," said Mr Bichir, "that the newspaper put Mr Levinson in a worse light than a full explication of the facts would show." In a similar manner, Mr Bichir continued, Mr Levinson made clear to the newspaper that the private sector legal services company where he worked after leaving the State Department was financed by venture capital. In the aftermath of the "dot-com" crash of 2000, that company was unable to raise new capital and ultimately slid into insolvency. While is it true was Mr Levinson's employment ended, so did the employment of other staff. Within months, the company itself was liquidated. Mr Levinson left on good terms with his former employers.

--The June 20 article does not report the intense and sustained effort of Mr Levinson, Ms Clark and others who strived to take a failing business activity and - in the face of the huge obstacles of doing business in an hostile war-zone - transform its business strategy and operations, maintain gainful employment and safety of its personnel, improve training and operations, and offer more competitive pricing than other security companies in Iraq, "The huge margins charged by security companies in Iraq were ripe for competition," noted Mr Bichir. "We provided that competition."

--In closing, Mr Bichir said, "This press release is intended - on behalf of a small company - to correct matters reported in depth by a major international publication."